Following in the foot steps of market leader SKF Bearings poor performance, are the results of NRB Bearings. Nearly 60 per cent of the company's volumes are picked up by the automobile industry, while the remaining 40 per cent are bought by the electrical motors, textile machinery and replacement industry. Thus given the economic slowdown, reduced offtakes from the automobiles and the industrial user segments have had a negative bearing on the company's financials. Volumes took a dip while net sales witnessed a 9.29 per cent fall to Rs 104.41 crore. Furthermore with the global bearing market witnessing sluggish offtakes, India has become a major dumping ground, which has led to a scenario of overcapacity and softening of prices. This has been amply highlighted by stagnation of the expenditure despite a turnover slump. Moreover, the operating profits have also dipped by 29.57 per cent to Rs 24.70 crore.

Analysts claim that the recession in the industry has led to low prices, which haverendered the production of certain types of ball bearing uneconomical. This has been reflected by the fall in the operating margins from 30.47 per cent to 23.66 per cent. Although 1997-98 witnessed a fall in the interest rates, the company's financial charges have however remained stagnant at Rs 4.38 crore (4.48 crore). With delayed payments, the interest coverage ratio has witnessed a downward spiral with a fall from 7.65 times to 4.99 times.

Furthermore a higher depreciation charges resulting from the Rs 17 crore needle roller bearings, needle brushes and cages expansion project, have created a drain on earnings. In fact net profits have actually slumped 38 per cent to Rs 11.76 crore. Thus for the future NRB's fortunes are heavily dependent on a resurgence in the economy. Firstly because the company is to commission its Rs 30 crore expansion of cylindrical rollers and taper rollers in September '98, which would mean pushing in more capacities in an already crowded environment. Next, while the impositionof a 4 per cent import duty would make imports of finished ball bearings costlier, it would also affect the price of SAE52100 -- a vital steel input.

Tata Donnelley

A poor year for the graphic arts industry, primarily due to excess capacities and predatory pricing strategies, has manifested itself in the results at Tata Donnelley (TDL). In fact for the year ended March, 1998, TDL has managed just a 1.5 percentage point growth in turnover which was at Rs 71.29 crore (Rs 70.27 crore last year). Now compare this with a five year CAGR of almost 35 per cent for revenues and one need not emphasise the problems for the company. Analysts state that even this performance was due to continued success of the yellow pages division, what with its nine editions in major Indian cities.

However this aside the company's performance on the financial front remains quite impressive. Stringent cost control helped TDL curtail expenditure and thus buoy operating margins which jumped from 14.13 per cent to 20.12 percent. This cost saving has in fact helped improve operating profits from Rs 9.93 crore to Rs 14.34 crore. This aside TDL has also managed to reduce its interest burden, which dropped 27.16 per cent to Rs 0.51 crore.

Thus net profits at Rs 7.63 crore, were actually up 22.04 per cent compared to Rs 7.53 crore. Interestingly the buoyancy in profits was despite a lower other income component and some one off expense of Rs 0.55 crore due to the company's Voluntary Retirement Scheme. For the future, TDL would do well to create and offer niche printing products along the lines of the ultra violet printing machine acquired in 1997. Specialised products like the recent inclusion of a directory for exporters would also help. However in the interim with price cutting set to continue and the number of players increasing all the time, TDL earnings stream would continue to remain pressurised. A fact clearly reflected by the bearish sentiment for the company's stock which has in fact been on a continual southward spiralcurrently trading around the Rs 150 levels, which is precariously close to its 52-week low of Rs 140.

Finolex Cables

The Finolex cables scrip has been on a steady southward spiral dropping from a high of Rs 222 in May, 1998, to the current levels of Rs 124. The reason for which has been the stagnant results for the year ended March 31, 1998. Owing to the reduction in the rate of excise duty applicable by 7 per cent, the income from operations has reduced by 5.2 per cent to Rs 439.46 crore, while operating profits have also declined to Rs 85.32 crore. Furthermore operating margins have remained stagnant at around the 19 per cent mark, thanks largely to dwindling offtakes from the telecom cable segment which incidentally accounts for two-thirds of its turnover. The jelly filled telecom cables (JFTC) segment also earns the lowest margin of 5 per cent, as against 8 per cent for light cables. Competition has also increased with the number of new entrants increasing. A higher interest burden up 11 percent to Rs 23.69 crore, has further led to a bottom line which remained static at Rs 48 crore. Finolex has increased its focus on power cables to make up for any delay in telecom projects. Though the demand for high-voltage power cables is low once the various pending power projects are executed, business should improve. Moreover, the privatisation of basic services would give the company business opportunities in the optic fibre segment. The company could expect returns on its Rs 90 crore investment in this sector. Furthermore higher realisations from TV cables and specialised cables for computer LAN configurations would help. All this would reduce its over dependence on JFTC.

(With contributions from Vikram Bhat, Percy Dubash and AG Krishnan)